Baseball and Sustainability Part II

Michael Lewis’ book Moneyball was about a lot more than a new way of looking at the management of a baseball team. It was about an appreciation for systems thinking. It was about an understanding of statistics and variation. It was about new knowledge and its genesis. And it was about human psychology. The thesis of Moneyball was complex, yet it struck a chord of familiarity with me.

Nearly two decades ago I had become familiar with these themes as I sat in a class at Columbia University’s Graduate School of Business. The professor was a ninety year-old man named W. Edwards Deming.
Known alternatively as “the man who taught the Japanese about quality” or “the father of TQM” (total quality management), Deming rejected these characterizations saying “I never taught the Japanese about quality, I introduced them to the principles of a system.” The appreciation of those principles directly resulted in what has been called the Japanese Economic Miracle and Deming’s role was central. To this day the highest honor for business excellence in Japan is The Deming Prize.

In his classes Deming talked about a system of transformation that would be necessary to make America competitive again. He called it a system of a profound knowledge and it contained four interconnected and interdependent components:
- Appreciation for a System
- Knowledge of Variation
- Theory of Knowledge
- Knowledge of Psychology

What Michael Lewis wrote about in a baseball context was what Deming called profound knowledge. Deming applied it not to sports but primarily to the social enterprise of business. The Japanese listened and thrived. Toyota is a great example of a company run using profound knowledge. Deming was very critical of American management which largely ignored him. GM may have dabbled in Deming here and there, tweaking around the edges, but they never embraced profound knowledge as a system. Critics of Deming - especially American critics - say he cared about soft things like human motivation, interdependence, and alignment of aims - and he ignored the harder issues that American managers are up against every day - like profitability and stock price. But you have to ask yourself, whose stock would you rather own today, Toyota or GM?

Applying profound knowledge to baseball is fun, and applying it to American business is important. But there is a more urgent application for profound knowledge in the 21st century. Today’s global economy requires transformation. Addressing climate change and building a sustainable global economic system will be the organizing principles of the 21st century. Climate change is not a problem as much as a symptom – a symptom of a misalignment between two very powerful systems, the planet earth and the global economy that is embedded within it.
To address climate change it must be viewed from a systems perspective, where the planet is the system, and the global economy is a sub-process – a very powerful subsystem – within the system. Using Deming’s systems approach, where each component must align with the aim of the overall system, the global economy must be aligned with the aim of the planet. Failure to do so can result in sub-optimization, decay and the ultimate destruction of the system.

Human civilization has been aligning these two systems for centuries - but getting it backwards. For a very long time we have been putting the earth in service of the human economy, instead of aligning the human economy with workings of the earth. Getting this right has wide implications for how we power our economy, how we feed ourselves, and how we develop and grow. In aligning with the planet’s ecosystem we will find how to (1) live on current energy income (i.e. renewable energy), (2) operate with the knowledge that waste = food (i.e. closed loop recycling,) and (3) become information intense and energy efficient (as biological systems are.)

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Baseball & Sustainability - Part I

It is summer. Minds turn to baseball as they have since that first game in Hoboken, New Jersey back in 1846. Baseball and its limited set of rules have been around for a long time. So it is stunning to think that after 150 years of one way of looking at baseball, new knowledge could come forth. But that's exactly what has been happening over the last decade. New knowledge about baseball. New ways of looking at something old, new opportunities for creating something very different, something better.

Where does new knowledge comes from? A wise man once said it comes from the innately curious individual who is responsible to no one. That describes a very special kind of person. A scientist perhaps, a thought leader, maybe an independent business person. It certainly describes Bill James, a man who set out to show the world that the way baseball was being managed at the professional level was idiotic. James published an independent journal about baseball emphasizing new ways of looking at information long ignored by the powers that be in MLB (Major League Baseball). James felt that the aim of management of baseball ought not to be about results - the most Home runs, RBI's, or wins. Not at all. The aim of managing a baseball team is understanding the process by which you get a player on base. Once a manager mastered that, the runs and wins would take care of themselves.

Realizing baseball as a process has a huge effect on what the definition of "doing a good job" means - with its implications for reward systems. For example, if baseball is only about results, then a batter who strikes out a lot makes no contribution to the team and is thus not rewarded. But if baseball is about process, then if a batter in striking out forces opposing pitchers to throw 15 or 20 pitches then he is making an extremely valuable contribution to the team. There may be no measure of this in the box score, but wearing down opposing pitchers arms is essential to winning games.

James and his independent journal The Bill James Handbook were covered at length in the book by Michael Lewis "MoneyBall."


Lewis showed how a team with one of the lowest payrolls in baseball, the Oakland A's, was able to achieve over a 10-year period one of the best regular season win-loss records in the major leagues, by employing the new knowledge of independent thinkers like Bill James.

If the limited sphere of baseball presents fertile ground for new knowledge how much more of an opportunity might exist in the sphere of business? If baseball managers, scouts and commentators were myopically focused on home runs, RBI's, and wins, business managers, analysts and reporters are no less focused on marketshare, quarterly earnings and stock price. Wouldn't it be great if someone could come along in business as James did in baseball and shake things up? Perhaps an independently thinking analyst could show how management in a business-as-usual mindset was missing out on great opportunities? Instead of managing with the aim of increasing market share, profit or stock price, what if management's aim was understanding their business as a system for producing the best value of good or service? What if an improved financial position was seen as the consequence - rather than the aim - of a corporate strategy? But that's not today's reality. Many in the greek chorus of business - as seen on CNBC and Bloomberg TV every day - are as fascinated by the market's daily spikes and plunges as baseball insiders are by home runs and high scoring games. How can a culture focused on financial results be transformed to focus instead on the means from which those results ensue? Isn't that what sustainability is all about? (Continued in Part II.)

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